JAPAN Trends and Developments Contributed by: Daniel Allen, Seri Takahashi, Lexi Takamatsu and Yoshinori Tatsuno, Mori Hamada
Much of this surge in interest can likely be attributed to activity relating to claims by Japanese investors against Switzerland arising out of the Credit Suisse AT1 bond write-down. Many potential claimants have used third-party funding to bring such claims, often on a group basis and many funders have been seriously evaluating those claims. In at least two instances, funders have entered into or pursued funding arrange - ments with Japanese claimant groups, a fact reported in the mainstream press both in Japan and outside Japan. Although these are not the first instances of Japanese claimants using third-party funding in inter - national arbitration or even in investment arbitration, this is the first time the topic has received sustained mainstream attention. Interest is likely to continue as those claims progress and further public reporting appears. There have also been reports of third-party funding having been successfully used by parties in domestic Japanese litigation. If those reports are correct, they represent a significant achievement in the develop - ment of the Japanese third-party funding market and a point to watch closely in the coming years. From a regulatory perspective, meanwhile, the situ - ation remains essentially unchanged. Japan has no specific legal rules relating to or regulating third-party funding as an autonomous concept. Experience to date suggests that such arrangements can be legally workable if Japanese law and professional responsi - bility issues are addressed.
There are, of course, potentially applicable ethical and other professional regulations and those must be strictly followed. It remains highly advisable to careful - ly scrutinise any potential funding arrangement involv - ing Japanese individuals or entities under Japanese law to ensure enforceability and avoid violations of law. Key points include: • avoiding profit-sharing between lawyers and non- lawyers; • maintaining the client’s right to instruct counsel and control the conduct of the case; and • ensuring counsel’s independence, confidentiality, privilege and conflict management. • As many lawyers in Japan remain unfamiliar with third-party funding, selection of counsel with expe - rience in this area is also advisable. Nevertheless, the question of “if” and “how” third- party funding should be directly regulated in Japan is now actively debated within the legal community and by legal regulators. While no specific progress can be reported at this time, developments on that front are expected soon.
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